The FINANCIAL -- Bank Republic has received a USD 10 million trade finance guarantee from the International Finance Corporation (IFC), a member of the World Bank Group. The funding is designed to help Bank Republic finance the foreign trade transactions of local companies.

“As Bank Republic has joined the IFC Global Trade Finance Programme as an issuing bank, the IFC’s guarantees will help Bank Republic finance the import and export operations of clients, including small and medium-sized enterprises,” Gilbert Hie, Chief Executive Officer of Bank Republic, SocGen Group, says.

According to Hie this will increase trade transactions by providing financing with enhanced flexibility and competitive pricing terms.

“This is additional evidence that IFC is very committed to helping Georgia and to strengthening its partnership with Bank Republic. This USD 10 million is only an additional facility. It is a long term partnership and we are expecting other facilities in 2009 depending very much on the global portfolio. We always work together with IFC on long term business because they are one of our strongest partners,” Hie notes.

IFC promotes sustainable private sector development in developing countries as a way to reduce poverty and improve people’s lives.

Georgia joined the IFC in 1995, in the aftermath of economic collapse and civil unrest after independence. IFC designed its strategy to address Georgia’s limited foreign investments, the non-existence of large companies, limited access to financing for a nascent SME sector, and the lack of advice for private companies on business related issues.

IFC has worked with Bank Republic since 2005, when BR participated in IFC’s advisory programme to implement the best corporate governance practices.

In September 2007 Bank Republic singed a USD 20 million 5 year credit line agreement with IFC and the line was used to finance small and medium enterprises, the backbone of Georgia’s economy. It was also used to strengthen mortgage lending to help families improve their living conditions, as well as student loans, making quality education accessible to young people.

IFC has four bank clients in Georgia: Bank Republic, Bank of Georgia , TBC Bank and Procredit Bank.

“For Bank Republic we launched USD 20 million credit lines in 2007. In 2008 - USD 15 million credit line and USD 7 million subordinated loan. For Bank of Georgia we have provided USD100 million, including subordinated and subordinated convertible loans of up to USD 50 million to support the bank’s capital base, and a senior loan of USD 50 million to provide longer-term liquidity that will allow the bank to continue lending to retail clients and small and medium enterprises, two key client bases that will drive economic growth in Georgia. For TBC Bank we are considering financing up to USD 70 million,” Thomas Lubeck, Regional Head of IFC, Caucasus, told The FINANCIAL.

Lubeck has been working on projects in Georgia going back over the past eleven years. “I really have a large amount of perspectives on how the banking system has developed in this country,” Lubeck says.

“What Georgian banks are today is absolutely no comparison with what they were before. They are more professional, much better managed. The bankers have seen hundreds of crises. This is not the first round of difficulties on the Georgian market and so the bankers are therefore that much more experienced. Every time IFC makes an investment, we do very careful analyzes before and investigate the banks. We have to be sure that the institution is strong and solid and that the money is playing some role in helping them. In the case of any investments we’ve made we always do credit and profitability judgment,” Lubeck explains.

Lubeck mentions that all of the Georgian banks did an absolutely fantastic job of managing during what was a real crisis in August. “They faced a withdrawal of deposits and decreased confidence in the system. The fact that Georgian banks managed to avoid it together with National Bank of Georgia (NBG) is something absolutely extraordinary,” he says.
 
Lubeck’s advice for the banks that are facing problems during the current hard time: to focus on the quality of their loans and try to keep their depositors happy so as to keep their deposits.

The Regional Head of IFC, Caucasus, says that the origins of the crisis began in the United States. The loans were given particularly for mortgages to people who did not have proper repayment capacity. The loans were then sold to other financial institutions and when these people stopped paying they started facing losses.

“But I would say that the situation is different here in Georgia. If you look at how many loans there are in the economy, you will see that they are a very low percentage compared to the US, Europe and other parts of Asia,” Lubeck says.

Recently the demand for credit lines from banks has shortened. Meanwhile the interest rates have increased. “Our landing activity was very active until the end of 2008. Since the beginning of 2009 the demand from corporate and individual customers has been going down. Many individuals have lost their jobs or part of their income. Accordingly the demand for financing from the population to the banking sector is a little bit less. The portfolio of the banking sector is not growing at a fast rate from statistics of the year 2009 but we are very confident that this activity will pick up in the second part of 2009 and thus our portfolio will grow,” Hie notes.

Further to the August war in Georgia and international financial crisis the global rates on the international market have increased. This is an automatic growth of loans for Georgian customers as well.” Borrowing money has become more expensive for us and therefore we lend money at higher rates. In the future, before the end of this year, I think we’ll be able to slow down rates. However unfortunately credit will remain expensive in Georgia like in many other countries, for the time being,” Hie declares.

Bank Republic is constantly working with most financial institutions. Their largest fund provider is Societe Generale Group, also the European Bank for Reconstruction and Development, IFC, KFW and ADB.

“We are glad to support Bank Republic, our long-term partner. By joining IFC’s trade finance programme, the bank will be able to help its clients reach new markets and support foreign trade in the region,” Nena Stoilijkovic, IFC Director for Central and Eastern Europe, said.

Written By Madona Gasanova

Related Stories

• Ministry of Finance of Georgia Treasury Bill Auction Results
• Updates of NBG’s Monetary Survey Data
• “Save Money While You Spend”